How to Build a non-$0.99 iPhone App

iPhone app developers are stuck on a number — $0.99. Do they like this number? No. They hate it. But they believe that it leads to the lands of the Top 100 and the promise of riches and glory. With around 200 – 400 new apps going into the App Store per day, betting on $0.99 is a huge gamble and one that can almost definitely ensure that developing on the iPhone platform is just a fun hobby.

So, how do you break the cycle of $0.99? Well, before I launch into my ideas, I need to point out that they are ideas. I’ve talked to many successful and not-so-successful iPhone app developers and done some price testing myself but these are principles and guidelines. Now that my disclaimer is out of the way, here are the ways you can avoid going $0.99:

1. The Duh Route – Unique Product / Features

Why do so many developers price their apps at $0.99? Because they had what they considered a good idea and started building it. No market research. No App Store research. No discussions with potential users.

In a crowded marketplace, developers compete on price…only. They have to if their app looks the same, functions the same, and is the same as dozens of apps in the App Store.

It is critical to vet those “good ideas.” Keep a running list of them and then do some homework to understand if developing the app is going to add value to the marketplace and be a worthwhile investment of time and money. There are many tangible ways to do that, including leveraging frameworks and tools like:

Of course, even doing this sort of work can still mean entering a marketplace with competitors. That’s where features, user experience, design, customer support, and other factors besides price will still differentiate a product. Pricing your app at $0.99 basically says,

“I’m the same as every other app out here. I’ve spent the same amount of time developing it, have not really thought about why mine is better, and can maintain this app for you going forward at this price point.”

Spend some time and money up front thinking strategically about your product to reduce a potentially much larger and more costly investment. For the matter, get a product strategist involved.

While price is not the only factor, it is a factor. Price the app according to or in the range of comparable apps; comparables need not be direct competitors. If all apps are selling at $0.99, then unless yours absolutely destroys the competition, you probably can’t price it at $9.99. In that case, $1.99 or $2.99 are very reasonable price points and could make significant impacts on revenue.

2. Lite Plus Pro

An increasingly popular approach to overcome the cost of free and $0.99 is to launch a lite and pro version of the app. Developers typically pull out features or somehow limit functionality in the “lite” version, offering users the ability to experience the app without purchasing it.

Since the iPhone does not have the ability to support a trial period, this approach may most closely mimic that paradigm. That’s especially true because there is data that supports application “opens” generally decrease with time. If a user is compelled to continue to use an app over time, thereby overcoming this trend, there’s a likelihood that he’ll convert to the paid application.

The key to this approach is allowing the customer to get a complete sense of the application without removing the incentive to convert or upgrade to the pro version. How to break out these features is highly dependent on the category and use of the app. Do some research to see how comparable apps handled the feature break out.

To really make the lite plus pro method hum though, there has to be a very simple upgrade path. Many developers link to the pro version on the App Store from within the lite app. That’s not bad. A more elegant solution, however, could be an in app upgrade, which would allow the user to maintain settings and data.

3. Companions and Bundles – Web + iPhone / Desktop + iPhone

More and more web or desktop software have iPhone companions. In most cases, the iPhone apps are priced independently but will sync or complement the full app. These apps are almost always priced at or above $1.99. For example, check out Hog Bay Software’s WriteRoom and WriteRoom for iPhone ($4.99) or Simplenote ($1.99). Simplenote is particularly interesting because the website is actually a selling point for the iPhone app and not vice versa.

Another option is to price the web or desktop software with the cost of an iPhone app included. The benefit to this approach versus two separately priced apps is that the customer does not have to open his wallet twice. There are some intricacies to this approach, such as how to position the app on the App Store and designing the apps so that they are only useful together.

Conclusion

Remember that the App Store model means that once users download the app, they indefinitely get updates over the lifetime of the developer (YOU) maintaining it. Therefore, the way the app is priced should consider support costs and additional development time. If you plan on doing more than just bug fixes and investing in new features or if your app has long-term value (i.e., probably not a game), then it’s a no brainer to not price at $0.99.

Another benefit of not going $0.99 is that you will price yourself out of the customers you don’t want. Consider who your audience is and how, for example, a $9.99 app could ensure that you don’t get reviews from people that clearly don’t understand what your app is supposed to be doing. Talk with likely customers, use data from your customer development surveys, and look at the market to understand the non-$0.99 price that still makes purchasing your app fall into the “why not” bucket.

Of course, you can follow all or some of these approaches and the app still be a bust. So, be prepared to cut your losses and move on to the next idea. Keep engaged early on to understand if your app has the legs to be a longer term investment. Experiment with short-term price cuts to see how users respond — launching above $0.99 means that you have the ability to try something other than free.